Market equilibrium
Market equilibrium is the price and quantity at which quantity demanded equals quantity supplied in the relevant model. It describes balance under specified conditions, not proof of fairness or the absence of external effects. Changes in demand or supply can produce a new equilibrium. Actual markets may adjust slowly or be affected by regulation and other constraints.
Worked example
At $8 consumers want 1,200 units while suppliers offer 900. At $10 both demand and supply are 1,000 units, so $10 and 1,000 units form the model’s equilibrium.
Common mistake
Do not assume equilibrium guarantees social efficiency or means supply and demand never change. Distinguish the model’s balance from an ethical judgement about the outcome.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Supporting | September 2026–June 2027 |
| FIA | FBT | Supporting | September 2026–June 2027 |